Despite no straightforward procedure for integrating a new rooftop solar initiative in the country, indications from the government point to a possible incentivisation for homeowners to get solar panels on their property.

On 23 January, President Cyril Ramaphosa said that rooftop solar panels are a significant source of new generation capacity in South Africa, adding that the government is currently working on a pricing structure to allow customers to sell surplus electricity back to the national grid.

“To incentivise greater uptake of rooftop solar, Eskom will develop rules and a pricing structure – known as a feed-in tariff – for all commercial and residential installations on its network,” he said.

Way before this announcement, some South Africans have taken energy security into their own hands. Solana Energy, a solar provider, said that within the residential solar sector, households imported over R2.2 billion worth of solar photovoltaic panels in the first five months of 2022 alone.

“With solar now becoming a regular feature for businesses of all shapes and sizes, residential users are investing in solar installations, and this growth is being accelerated due to prolonged load shedding,” Solana said.

Pressure to shift away from Eskom has also mounted with a recent electricity price hike authorised by the National Energy Regulator of South Africa (Nersa), which is allowing the utility to hike prices by 18.65% from 1 April 2023.

Moving to solar

According to Solana Energy, the biggest concern for South Africans looking to get into solar is the high cost of the initial investment.

Banking group Capitec estimates that the start-up costs to get solar installed and going off-grid can range from R150,000 to R350,000.

However, the bank noted that prospective solar users don’t need to go all-in or completely off-grid, with interim solutions also available. Banks and lenders are also capitalising on the growing demand for solar, creating new products and services to make the move easier.

Grant Smee, the managing director of Only Realty Property Group, said the increased popularity of solar power had given rise to various innovative financing options to make solar more accessible and more affordable.

Smee listed the following methods of getting your hands on solar:

• Outright purchase: Buying the system outright using one’s own funds.

• Financing the system through a home loan provider: Some of the major banks now offer the ability to ‘add the cost of solar installation to one’s home loan.

• Rent-to-own: Various solar financing companies have popped up in recent years, offering consumers the option to pay a monthly fee for solar, with the understanding that they will own the equipment after a certain period of time – usually five to seven years.

• A subscription service: Solar providers such as GoSolr offer a fixed-monthly subscription to solar power using their equipment. Prices generally start at R1,580 per month.

Financing

As stated by Smee, you can finance a system through a home loan provider – you can do this by seeking help from a bond originator.

Bond originators specialise in helping homeowners secure additional funding for various needs, including home installations.

One of the easiest options available is to increase an existing home loan, allowing homeowners to access a portion or the total amount of their original home loan and use it towards the installation cost of the solar system.

Another option is to apply for a re-advance, allowing homeowners to access a portion or all of their original home loan.

For homeowners without home loans, banks such as Absa, FNB, and Nedbank offer various options for homeowners looking to take out loans specifically for solar and backup systems to guard against load shedding.

Standard Bank, meanwhile, has services on offer for commercial and industrial clients.

Companies such as Hohm Energy are currently partnered with Nedbank, ooba and Hippo to service their clients. Hohm Energy is a marketplace linking homeowners to solar installers and financing options.

The costs

The cost of a solar solution depends entirely on the scale of the product or what type of system you want. There are four main frameworks:

• Load shedding backup: This is typically an inverter and a battery backup, charged by the grid when power is available. No solar panels are involved.
• Grid-tied solar: A grid-tied inverter with solar panels. You are still connected to the grid while allowing you to supplement your energy needs when the sun is shining.
• Hybrid system: A grid-tied inverter with solar panels and battery storage. The batteries are charged by solar or the grid depending on what power sources are available.
• Off-grid system: A solar system with battery storage. Energy generated from your solar system is stored in large battery banks, and you can operate independently from load shedding.

The more independent you move, the higher the costs.

According to Absa’s load shedding finance calculator, a household that spends R2,500 a month on electricity would need to spend over an estimated R190,000 to go completely off-grid through the use of solar panels, an off-grid inverter, battery storage and a backup generator.

As the requirements narrow – ie, using a grid-tied solution or just looking to reduce the energy bill – the estimated costs decrease. To install a system to get you through load shedding would cost just under R50,000.

While the estimates are simple guidelines, more complex analyses – like that from Hohm Energy – reflect similar pricing, with solar solutions for a medium-energy home coming in around R150,000 to R170,000.

Pricing estimates from Solana Energy put the cost of alternative energy between R60,000 for a system without panels to R290,000 for large-scale solutions.

Herein lies the big caveat for trying to move away from Eskom and load shedding. Because of the high cost of entry, whether financing the project outright or going the loan route, residents will ultimately end up paying more for the system than their typical monthly electricity bill.

The costs typically work out to be R3,500 a month for a household that pays R2,500 for electricity. (Note: This would vary greatly depending on electricity use and specific solar solution, but was the outcome for the author’s specific needs.)

Hohm noted that most solar solutions start “paying back” only after three to eight years – while financing options are for loan terms of around six years.

The benefit, however, is that residents will actually have electricity and not be slaves to Eskom’s permanent load shedding expected over the next two years.